978-0538496902 Chapter 31

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STUDENT _______________________________________ CLASS _______________________ DATE _________

ȱLESSONȱ31—1ȱQUIZȱ

LegalȱConceptsȱ

Directions:ȱFillȱinȱtheȱblank(s)ȱwithȱtheȱmostȱappropriateȱtermȱorȱphraseȱtoȱcompleteȱ

theȱsentence.ȱ

ȱȱ Answersȱ

ȱȱ1.ȱ ȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱareȱgoodȱagainstȱeveryoneȱexceptȱanȱ

HDCȱorȱanȱHHDC.ȱ

1._______________________ȱ

ȱȱ2.ȱ ȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱisȱaȱmethodȱofȱdischargeȱthatȱconsistsȱ

ofȱanyȱactȱofȱtheȱcurrentȱholderȱthatȱindicatesȱanȱ

intentȱtoȱendȱtheȱobligationȱofȱpayment.ȱ

2._______________________ȱ

ȱȱ3.ȱA(n)ȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱisȱaȱholderȱwhoȱtakesȱcommercialȱ

paperȱanytimeȱafterȱanȱHDC.ȱ

3._______________________ȱ

ȱȱ4.ȱTheȱmostȱcommonȱmethodȱofȱdischargingȱcomȬ

mercialȱpaperȱisȱbyȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ.ȱ

4._______________________ȱ

ȱȱ5.ȱDefensesȱthatȱareȱgoodȱagainstȱallȱplaintiffsȱsuingȱ

onȱaȱnegotiableȱinstrumentȱareȱcalledȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ.ȱ

5._______________________ȱ

ȱ6.ȱA(n)ȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱmustȱqualifyȱasȱaȱholder,ȱtakeȱ

commercialȱpaperȱinȱgoodȱfaith,ȱgiveȱvalueȱforȱit,ȱ

andȱnotȱhaveȱknowledgeȱofȱanyȱdefense,ȱadverseȱ

claimȱto,ȱorȱdishonorȱofȱtheȱinstrument.ȱ

6._______________________ȱ

ȱȱ7.ȱTakingȱcommercialȱpaperȱinȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱmeansȱtheȱ

holderȱactsȱhonestly.ȱ

7._______________________ȱ

ȱȱ8.ȱA(n)ȱȱȱȱȱȱȱȱȱ?ȱȱȱȱȱȱȱȱisȱaȱpersonȱwhoȱhasȱphysicalȱposȬ

sessionȱofȱbearerȱorȱorderȱpaperȱpayableȱtoȱtheȱ

orderȱofȱthatȱpersonȱasȱaȱpayeeȱorȱindorsee.ȱ

8._______________________ȱ

ȱȱ9.ȱȱȱ A(n)ȱ___________ȱisȱaȱparty’sȱunauthorizedȱ

changeȱtoȱorȱcompletionȱofȱaȱnegotiableȱinstruȬ

mentȱintendedȱtoȱchangeȱtheȱobligationȱofȱaȱ

party.ȱ

9._______________________ȱ

10.ȱA(n)ȱ____________ȱisȱoneȱinȱwhichȱaȱpartyȱbuysȱ

goodsȱorȱservicesȱforȱpersonalȱorȱhouseholdȱuse.ȱ

10.______________________ȱ

Chapter 31 Discharge of Commercial Paper and Electronic Fund Transfers 7-31

LegalȱApplicationsȱ

11.ȱHansȱrentsȱaȱhorseȱstallȱandȱpastureȱforȱhisȱquarterȱhorseȱfromȱhisȱneighbor,ȱ

Swanson.ȱHeȱowesȱ$500ȱinȱoverdueȱrent.ȱHansȱindorsesȱhisȱweeklyȱpaycheckȱ

andȱgivesȱitȱtoȱSwanson.ȱIsȱSwansonȱanȱHDCȱorȱanȱHHDC?ȱExplainȱyourȱanȬ

swer.ȱ

ȱȱ

12.ȱJacksonȱowedȱ$8,000ȱonȱaȱnoteȱheldȱbyȱSmithton.ȱSmithtonȱdiscoveredȱthatȱJackȬ

sonȱwasȱnearlyȱbankruptȱsinceȱheȱhadȱbeenȱpayingȱexpensiveȱmedicalȱbillsȱforȱ

hisȱchronicallyȱillȱwife.ȱSmithtonȱdrewȱaȱlineȱinȱinkȱthroughȱJackson’sȱnameȱonȱ

theȱnote.ȱHasȱJackson’sȱobligationȱtoȱpayȱbeenȱdischarged?ȱExplainȱyourȱanswer.ȱ

7-32 Chapter 31 Discharge of Commercial Paper and Electronic Fund Transfers

STUDENT _______________________________________ CLASS _______________________ DATE _________

ȱLESSONȱ31—1ȱPRACTICEȱACTIVITYȱ

Readȱtheȱfollowingȱcasesȱandȱanswerȱtheȱquestionsȱaboutȱthem.ȱAttachȱaȱpageȱifȱadditionalȱ

spaceȱisȱneededȱforȱanswers.ȱ

1.ȱGeraldȱowedȱKaneȱforȱsomeȱcowsȱheȱhadȱboughtȱfromȱKane.ȱGeraldȱaskedȱhisȱ

mother,ȱGrace,ȱtoȱpayȱKane,ȱandȱheȱpromisedȱtoȱpayȱGraceȱbackȱwithȱtheȱmoneyȱ

saysȱheȱshouldȱbeȱableȱtoȱrecoverȱtheȱ$6,100ȱbecauseȱheȱwasȱaȱholderȱinȱdueȱ

courseȱofȱtheȱcheckȱandȱGrace’sȱproblemȱwithȱherȱsonȱisȱthereforeȱnotȱaȱbasisȱforȱ

notȱpayingȱhim.ȱIsȱheȱcorrect?ȱExplain.ȱ[Kaneȱv.ȱKroll,ȱ538ȱN.W.2dȱ605ȱ(Wis.ȱ

2.ȱPetersonȱenteredȱintoȱaȱseriesȱofȱloanȱagreementsȱwithȱCrownȱFinancialȱComȬ

panyȱinȱwhichȱPetersonȱwasȱtoȱpayȱoffȱtheȱloansȱinȱthreeȬyearȱinstallments.ȱAsȱ

indicatingȱthatȱ$363,875.62ȱwasȱdueȱonȱtheȱfourthȱnote.ȱThatȱsumȱwasȱtheȱdifferȬ

enceȱbetweenȱ$860,837.57ȱandȱ$499,658.95.ȱPetersonȱprotestedȱthisȱpaymentȱandȱ

allegedȱthatȱtheȱwordȱ“cancelled”ȱonȱtheȱfaceȱofȱtheȱfourthȱnoteȱrepresentedȱaȱ

dischargeȱofȱthatȱdebt.ȱWithȱtheȱ“cancelled”ȱnotation,ȱisȱtheȱdebtȱdischargedȱbyȱ

Crown,ȱaȱholderȱinȱdueȱcourse?ȱExplain.ȱ[Petersonȱv.ȱCrownȱFinancialȱCorp.,ȱ476ȱF.ȱ

Supp.ȱ1155ȱ(E.D.ȱPa.ȱ1979)]ȱ

Chapter 31 Discharge of Commercial Paper and Electronic Fund Transfers 7-33

STUDENT _______________________________________ CLASS _______________________ DATE _________

ȱLESSONȱ31—1ȱRETEACHȱ

Directions:ȱWriteȱtheȱanswersȱtoȱQuestionsȱ1–7ȱonȱtheȱblanksȱprovided.ȱTheȱanswerȱ

toȱQuestionȱ8ȱshouldȱappearȱinȱtheȱverticalȱboxes.ȱ

ȱȱ 8.ȱ

1.ȱȱ __ȱ__ȱȱ__ȱ__ȱ__ȱ

3.ȱȱ __ȱ__ȱ__ȱȱ__ȱ__ȱ__ȱ

5.ȱȱ __ȱ__ȱ__ȱ__ȱ__ȱ__ȱ__ȱȱ__ȱ

6.ȱȱ __ȱ__ȱ__ȱ__ȱȱ__ȱ__ȱ__ȱ__ȱ__ȱ__ȱ__ȱ

7.ȱȱ __ȱ__ȱȱ__ȱ

1.ȱPersonȱthatȱhasȱphysicalȱpossessionȱofȱbearerȱorȱorderȱpaperȱpayableȱtoȱtheȱorȬ

derȱofȱthatȱpersonȱasȱaȱpayeeȱorȱanȱindorseeȱ

2.ȱWhatȱkindȱofȱholderȱmustȱqualifyȱasȱaȱholder,ȱtakeȱcommercialȱpaperȱinȱgoodȱ

faith,ȱgiveȱvalueȱforȱit,ȱandȱnotȱhaveȱknowledgeȱofȱanyȱdefenseȱorȱdishonorȱofȱ

theȱinstrument?ȱ

3.ȱMostȱcommonȱmethodȱofȱdischargingȱcommercialȱpaperȱ

4.ȱTypeȱofȱdefenseȱthatȱisȱgoodȱagainstȱallȱplaintiffsȱsuingȱonȱaȱnegotiableȱinstruȬ

mentȱ

5.ȱAȱpersonȱwhoȱactsȱhonestlyȱisȱsaidȱtoȱactȱinȱwhat?ȱ

6.ȱMethodȱofȱdischargeȱthatȱconsistsȱofȱanyȱactȱofȱtheȱcurrentȱholderȱthatȱindicatesȱ

anȱintentȱtoȱendȱtheȱobligationȱ

8.ȱDefenseȱthatȱisȱgoodȱagainstȱanyȱholderȱthatȱisȱnotȱanȱHDCȱorȱaȱholderȱthroughȱ

aȱholderȱinȱdueȱcourseȱ

7-34 Chapter 31 Discharge of Commercial Paper and Electronic Fund Transfers

STUDENT _______________________________________ CLASS _______________________ DATE _________

ȱLESSONȱ31—1ȱENRICHMENTȱ

Inȱthisȱlesson,ȱyouȱlearnedȱthatȱtheȱobligationȱtoȱpayȱonȱcommercialȱpaperȱmayȱbeȱ

dischargedȱinȱoneȱofȱfiveȱways:ȱbyȱpayment,ȱbyȱcancellation,ȱbyȱalteration,ȱbyȱimȬ

pairmentȱofȱcollateral,ȱorȱasȱaȱcontract.ȱAloneȱorȱinȱgroups,ȱreviewȱtheȱdiscussionȱofȱ

eachȱofȱtheseȱprocessesȱinȱtheȱtext.ȱInȱtheȱappropriateȱspaceȱprovided,ȱfillȱinȱaȱbriefȱ

scenarioȱofȱaȱrealȱorȱimaginedȱexampleȱillustratingȱeachȱmeansȱofȱdischargingȱcomȬ

mercialȱpaper.ȱ

2.ȱByȱcancellationȱ

3.ȱByȱalterationȱ

4.ȱByȱimpairmentȱofȱcollateralȱ

5.ȱAsȱaȱcontractȱ

Chapter 31 Discharge of Commercial Paper and Electronic Fund Transfers 7-35

STUDENT _______________________________________ CLASS _______________________ DATE _________

ȱLESSONȱ31—2ȱQUIZȱ

Directions:ȱPlaceȱaȱTȱforȱTrueȱorȱanȱFȱforȱFalseȱinȱtheȱAnswersȱcolumnȱtoȱshowȱ

whetherȱeachȱofȱtheȱfollowingȱstatementsȱisȱtrueȱorȱfalse.ȱ

ȱAnswersȱ

1.ȱAȱconsumerȱwhoȱusesȱanȱEFTȱtransactionȱmustȱreportȱanȱerrorȱofȱ

overbillingȱwithinȱ30ȱdays.ȱ

1._______ȱ

2.ȱTheȱriskȱofȱunauthorizedȱEFTsȱisȱdividedȱbetweenȱtheȱconsumerȱ

andȱtheȱfinancialȱinstitution.ȱ

2._______ȱ

3.ȱAȱconsumerȱmustȱnotifyȱtheȱfinancialȱinstitutionȱwithinȱfiveȱbusiȬ

nessȱdaysȱuponȱlearningȱofȱtheȱlossȱorȱtheftȱofȱanȱautomaticȱtellerȱ

card.ȱ

3._______ȱ

4.ȱMostȱcommercialȱpaperȱlawsȱapplyȱtoȱelectronicȱfundȱtransfers.ȱ4._______ȱ

5.ȱȱȱTheȱfederalȱgovernmentȱenactedȱtheȱElectronicȱFundȱTransferȱActȱ

toȱprotectȱconsumersȱmakingȱsuchȱtransfers.ȱ

5._______ȱ

7.ȱȱȱElectronicȱdataȱinterchangeȱisȱusedȱforȱinternationalȱtransactions.ȱ7._______ȱ

8.ȱȱAutomatedȱtellerȱmachinesȱareȱtheȱonlyȱdevicesȱthatȱfacilitateȱEFTs.ȱ8._______ȱ

LegalȱApplicationȱ

ȱȱ9.ȱSydneyȱlaidȱherȱcarȱkeysȱandȱherȱATMȱcardȱonȱaȱbathroomȱsinkȱwhileȱsheȱwasȱ

washingȱherȱhandsȱinȱaȱrestaurant.ȱWhenȱsheȱturnedȱtoȱdryȱherȱhands,ȱtheȱcardȱ

wasȱstolen.ȱSydneyȱcalledȱtheȱpoliceȱandȱherȱfinancialȱinstitutionȱfromȱaȱpayȱ

phoneȱinȱtheȱrestaurant’sȱparkingȱlot.ȱTheȱthiefȱmadeȱtwoȱwithdrawalsȱofȱ$75ȱ

andȱ$350ȱthatȱevening.ȱHowȱmuchȱofȱtheȱlossȱwillȱtheȱfinancialȱinstitutionȱhaveȱ

toȱbear?ȱExplainȱyourȱanswer.ȱ

7-36 Chapter 31 Discharge of Commercial Paper and Electronic Fund Transfers

STUDENT _______________________________________ CLASS _______________________ DATE _________

ȱLESSONȱ31—2ȱPRACTICEȱACTIVITYȱ

Readȱtheȱfollowingȱcasesȱandȱanswerȱtheȱquestionsȱaboutȱthem.ȱAttachȱaȱpageȱifȱadditionalȱ

spaceȱisȱneededȱforȱanswers.ȱ

1.ȱInȱAprilȱ2002ȱAndrewȱGaleȱoverdrewȱhisȱcheckingȱaccountȱatȱHydeȱParkȱBank.ȱ

TransferȱAct.ȱTheȱBankȱhadȱpostedȱtheȱtransactionȱwithinȱ48ȱhoursȱofȱitsȱarrival.ȱ

DoesȱGaleȱhaveȱaȱcaseȱagainstȱtheȱbank?ȱ[Galeȱv.ȱHydeȱParkȱBank,ȱ384ȱF.3dȱ451ȱ

2.ȱAnȱunauthorizedȱpersonȱcalledȱaȱbank,ȱspokeȱwithȱaȱbankȱemployee,ȱandȱarȬ

rangedȱtoȱwithdrawȱ$4,900ȱfromȱaȱbankȱaccount.ȱWhenȱtheȱaccountȱholder,ȱwhoȱ

theȱcustomerȱsued.ȱDoesȱtheȱElectronicȱFundȱTransferȱActȱcoverȱthisȱtransaction?ȱ

Explain.ȱ[Kashanchiȱv.ȱTexasȱCommerceȱBank,ȱ703ȱF.ȱ2dȱ936ȱ(5thȱCir.ȱ1983)]ȱ

Chapter 31 Discharge of Commercial Paper and Electronic Fund Transfers 7-37

STUDENT _______________________________________ CLASS _______________________ DATE _________

ȱLESSONȱ31—2ȱRETEACHȱ

Directions:ȱȱWriteȱtheȱanswersȱtoȱQuestionsȱ1–5ȱonȱtheȱblanksȱprovided.ȱTheȱanswerȱ

toȱQuestionȱ6ȱshouldȱappearȱinȱtheȱverticalȱboxes.ȱ

ȱ ȱȱȱȱȱȱ6.ȱ

2.ȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ__ȱȱ__ȱ__ȱȱ

4.ȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ__ȱ__ȱȱ ȱ__ȱ__ȱ__ȱ__ȱ__ȱ__ȱ__ȱ

1.ȱTypeȱofȱlawȱthatȱwasȱinapplicableȱtoȱelectronicȱtransfersȱ

3.ȱAnȱelectronicȱ________ȱtransferȱisȱalsoȱcalledȱaȱwireȱtransfer.ȱ

5.ȱNumberȱofȱdaysȱaȱconsumerȱhasȱtoȱreportȱanȱoverbillingȱerrorȱ

6.ȱElectronicȱtransfersȱofȱlargeȱamountsȱofȱthisȱbyȱbusinessesȱareȱgovernedȱbyȱtheȱ

UniformȱCommercialȱCodeȱ

7-38 Chapter 31 Discharge of Commercial Paper and Electronic Fund Transfers

STUDENT _______________________________________ CLASS _______________________ DATE _________

ȱLESSONȱ31—2ȱENRICHMENTȱ

Inȱrecentȱyears,ȱaȱvarietyȱofȱtransactionsȱhaveȱbegunȱtakingȱplaceȱnotȱwithȱcommerȬ

cialȱpaper,ȱbutȱwithȱelectronicȱfundȱtransfersȱ(EFT).ȱAnȱEFTȱisȱaȱtransferȱofȱfundsȱ

thatȱrequiresȱaȱfinancialȱinstitutionȱtoȱdebitȱorȱcreditȱanȱaccount.ȱTheȱtransferȱisȱinitiȬ

atedȱbyȱtheȱuseȱofȱanȱelectronicȱterminal,ȱcomputer,ȱtelephone,ȱorȱmagneticȱtape.ȱ

ExamplesȱofȱdevicesȱthatȱfacilitateȱEFTsȱincludeȱautomatedȱtellerȱmachines,ȱpointȬ

ofȬsaleȱterminalsȱinȱstores,ȱpayȬbyȬphoneȱsystemsȱthatȱeliminateȱcheckȱwriting,ȱandȱ

automatedȱclearinghouseȱnetworksȱthatȱcreditȱpayrollȱchecksȱdirectlyȱtoȱaccounts.ȱ

Interviewȱfamilyȱmembersȱand/orȱfriendsȱwhoȱhaveȱusedȱEFTs,ȱandȱprovideȱdetailsȱ

ofȱtheirȱresponsesȱinȱtheȱspacesȱfollowing.ȱ

1.ȱListȱspecificȱexamplesȱofȱtheȱvariousȱwaysȱyourȱintervieweesȱhaveȱusedȱEFTs.ȱ

2.ȱWhatȱprecautionsȱdoȱtheȱEFTȱusersȱandȱtheȱfinancialȱinstitutionsȱtakeȱtoȱensureȱ

thatȱfundsȱdoȱnotȱpassȱintoȱorȱoutȱofȱtheȱincorrectȱaccountȱorȱintoȱaȱfraudulentȱ

user’sȱhands?ȱ

3.ȱAreȱyourȱintervieweesȱawareȱofȱtheȱinformationȱprovidedȱinȱtheȱtextȱregardingȱ

theȱconsumer’sȱresponsibilityȱofȱreportingȱoverbillingȱandȱunauthorizedȱtransȬ

fersȱandȱtheȱconsumer’sȱamountȱofȱliabilityȱinȱtheȱeventȱofȱanȱauthorizedȱtransȬ

fer?ȱHowȱdoȱfinancialȱinstitutionsȱattemptȱtoȱmakeȱthisȱinformationȱknownȱtoȱ

theȱpublic?ȱ

STUDENT _______________________________________ CLASS _______________________ DATE _________

ȱȱ

TESTȱ

CHAPTERȱ31ȱ

SECTION I—IDENTIFY LEGAL TERMS

Directions:ȱIndicateȱwhetherȱeachȱdefenseȱisȱuniversalȱorȱlimitedȱbyȱwritingȱUȱorȱLȱinȱ

heȱspaceȱprovided.ȱt

Answers

.ȱBreachȱofȱcontractȱ

.ȱConditionalȱdeliveryȱ

.ȱDefensesȱstemmingȱfromȱaȱconsumerȱtransactionȱ

.ȱDuressȱdeprivingȱcontrolȱ

.ȱFailureȱofȱconsiderationȱ

.ȱForgeryȱ

.ȱFraudȱasȱtoȱtheȱessentialȱtermsȱ

.ȱFraudȱinȱtheȱexecutionȱ

.ȱFraudȱinȱtheȱinducementȱ

10.ȱIllegalityȱ

11.ȱMinorityȱ

12.ȱOrdinaryȱduressȱ

13.ȱPriorȱpaymentȱ

14.ȱTemporaryȱincapacityȱtoȱcontractȱ

15.ȱTheftȱ

ȱ1.ȱȱ ȱ

ȱ2.ȱȱ ȱ

ȱ3.ȱȱ ȱ

ȱ4.ȱȱ ȱ

ȱ5.ȱȱ ȱ

ȱ6.ȱȱ ȱ

ȱ7.ȱȱ ȱ

ȱ8.ȱȱ ȱ

ȱ9.ȱȱ ȱ

ȱ10.ȱȱ ȱ

ȱ11.ȱȱ ȱ

ȱ12.ȱȱ ȱ

ȱ13.ȱȱ ȱ

ȱ14.ȱȱ ȱ

ȱ15.ȱȱ ȱ

SECTION II—THINK CRITICALLY ABOUT LEGAL CONCEPTS

Directions:ȱInȱtheȱAnswersȱcolumnȱatȱtheȱrightȱofȱeachȱstatement,ȱwriteȱtheȱletterȱthatȱ

representsȱtheȱword,ȱorȱgroupȱofȱwords,ȱthatȱcorrectlyȱcompletesȱtheȱstatement.ȱ

ȱȱ Answers

16.ȱȱ Allȱholdersȱhaveȱtheȱrightȱtoȱ(a)ȱassignȱbutȱnotȱdischargeȱtheȱpaper,ȱ

(b)ȱnegotiateȱbutȱnotȱenforceȱpayment,ȱ(c)ȱdischargeȱtheȱpaperȱwithȱ

orȱwithoutȱpaymentȱinȱreturn,ȱ(d)ȱnoneȱofȱtheseȱ

16._______ȱ

7-40 Chapter 31 Discharge of Commercial Paper and Electronic Fund Transfers

ȱȱ Answers

17.ȱWhenȱtryingȱtoȱcollectȱonȱanȱinstrument,ȱwhoȱisȱlegallyȱplacedȱinȱ

theȱsameȱpositionȱasȱassignee?ȱ(a)ȱHDC,ȱ(b)ȱHHDC,ȱ(c)ȱholder,ȱ(d)ȱ

bothȱaȱandȱbȱ

17._______ȱ

18.ȱȱ AȱfirstȬtimeȱholderȱofȱanȱinstrumentȱwhoȱsellsȱitȱtoȱaȱqualifiedȱ

HDCȱandȱthenȱtakesȱitȱbackȱfromȱtheȱHDCȱhasȱ(a)ȱimprovedȱtheirȱ

positionȱonȱcommercialȱpaperȱthroughȱreacquisition,ȱ(b)ȱonlyȱtheȱ

originalȱrightsȱasȱaȱmereȱholder,ȱ(c)ȱtheȱrightsȱofȱanȱHDC,ȱ(d)ȱtheȱ

rightsȱofȱanȱHHDCȱ

18._______ȱ

19.ȱDefensesȱthatȱareȱgoodȱagainstȱeveryoneȱexceptȱanȱHDCȱorȱanȱ

HHDCȱareȱtermedȱ(a)ȱlimitedȱdefenses,ȱ(b)ȱrealȱdefenses,ȱ(c)ȱuniȬ

versalȱdefenses,ȱ(d)ȱallȱofȱtheseȱ

19._______ȱ

20.ȱȱ ToȱbeȱconsideredȱanȱHDC,ȱaȱholderȱmustȱ(a)ȱgiveȱadequateȱvalueȱ

inȱrelationȱtoȱtheȱcommercialȱpaper,ȱ(b)ȱknowȱallȱtheȱdefensesȱ

againstȱenforcementȱofȱtheȱpaper,ȱ(c)ȱknowȱthatȱtheȱpaperȱisȱoverȬ

due,ȱ(d)ȱtakeȱtheȱpaperȱinȱgoodȱfaithȱandȱgiveȱvalueȱ

20._______ȱ

21.ȱAtȱmaturityȱorȱonȱdemand,ȱtheȱholderȱofȱcommercialȱpaperȱmayȱ

(a)ȱacceptȱpaymentȱmadeȱinȱmoney,ȱ(b)ȱagreeȱtoȱacceptȱotherȱ

commercialȱpaper,ȱ(c)ȱagreeȱtoȱtakeȱdifferentȱkindsȱofȱproperty,ȱ

(d)ȱallȱofȱtheseȱ

21._______ȱ

22.ȱȱ Commercialȱpaperȱmayȱnotȱbeȱdischargedȱbyȱ(a)ȱaccordȱandȱsatisȬ

faction,ȱ(b)ȱcancellationȱresultingȱfromȱfraud,ȱ(c)ȱfraudulentȱalteraȬ

tion,ȱ(d)ȱnovationȱ

22._______ȱ

23.ȱAnȱwireȱtransferȱisȱ(a)ȱconductedȱwithoutȱpaperȱinstrumentsȱsuchȱ

asȱchecksȱorȱdrafts,ȱ(b)ȱgovernedȱbyȱcommercialȱpaperȱlaw,ȱ(c)ȱ

mandatoryȱatȱallȱfinancialȱinstitutions,ȱ(d)ȱonlyȱlegalȱinȱaȱfewȱ

statesȱ

23._______ȱ

24.ȱIfȱmoreȱthanȱtwoȱdaysȱhaveȱpassedȱbeforeȱnotificationȱofȱunauȬ

thorizedȱelectronicȱfundȱtransfers,ȱtheȱcustomerȱmayȱbeȱresponsiȬ

bleȱforȱupȱtoȱaȱmaximumȱofȱ(a)ȱ$50,ȱ(b)ȱ$100,ȱ(c)ȱ$500,ȱ(d)ȱ$1,000ȱ

24._______ȱ

25.ȱElectronicȱfundȱtransfersȱbyȱbusinessesȱareȱgovernedȱbyȱ(a)ȱArticleȱ

4AȱofȱtheȱUCC,ȱ(b)ȱCMI,ȱ(c)ȱEDI,ȱ(d)ȱEFTAȱ

25._______ȱ

Chapter 31 Discharge of Commercial Paper and Electronic Fund Transfers 7-41

SECTION III—APPLY LEGAL PRACTICES

26.ȱTheȱholderȱofȱEric’sȱnoteȱfraudulentlyȱchangedȱtheȱrateȱofȱinterestȱdueȱfromȱ8ȱ

percentȱtoȱ18ȱpercent.ȱDoesȱEricȱhaveȱtoȱpay?ȱExplainȱyourȱanswer.ȱ

Chapter 31 Discharge of Commercial Paper and Electronic Fund Transfers

7-42ȱ

ANSWERS

Lessonȱ31—1ȱ

Quiz

Practice Activity

1.ȱYes,ȱKaneȱisȱaȱholderȱinȱdueȱcourse.ȱTheȱcourtȱheldȱthatȱinȱorderȱtoȱbeȱaȱholderȱinȱ

dueȱcourse,ȱaȱpersonȱmustȱtakeȱtheȱinstrumentȱforȱvalueȱ(satisfiedȱhereȱbyȱ

Kane’sȱtakingȱofȱtheȱcheckȱfromȱGrace);ȱmustȱtakeȱtheȱinstrumentȱinȱgoodȱfaithȱ

2.ȱYes,ȱtheȱdebtȱwasȱdischarged.ȱTheȱcourtȱdisagreedȱwithȱCrown.ȱItȱheldȱthatȱtheȱ

Reteach

Chapter 31 Discharge of Commercial Paper and Electronic Fund Transfers 7-43

Enrichment Activity

Lessonȱ31—2ȱ

Quiz

ȱ9.ȱBecauseȱbothȱwithdrawalsȱwereȱmadeȱafterȱSydney’sȱcall,ȱtheȱfinancialȱinstituȬ

Practice Activity

1.ȱTheȱcourtȱfoundȱhereȱthatȱalthoughȱtheȱbankȱdidȱnotȱdepositȱhisȱcheckȱforȱfourȱ

months,ȱtheyȱwereȱnotȱliableȱtoȱGale.ȱTheȱcourtȱheldȱthatȱsinceȱGaleȱwroteȱ

2.ȱNo,ȱtheȱEFTAȱdoesȱnotȱcoverȱthisȱtransaction.ȱTheȱcourtȱheldȱthatȱaȱtransferȱofȱ

moneyȱauthorizedȱoverȱtheȱtelephone,ȱwhichȱwasȱallegedȱbyȱtheȱaccountȱholderȱ

toȱbeȱfraudulent,ȱwasȱnotȱcoveredȱbyȱtheȱEFTA.ȱThisȱactȱexcludesȱtelephoneȱ

Reteach

Enrichment Activity

Chapter 31 Discharge of Commercial Paper and Electronic Fund Transfers

7-44ȱ

ANSWERS TO TEST QUESTIONS

SECTIONȱIȱ

SECTIONȱIIȱ

SECTIONȱIIIȱ

26.ȱIfȱtheȱfraudulentȱchangeȱisȱprovenȱinȱcourt,ȱEricȱwillȱnotȱhaveȱtoȱpay.ȱHowȬ

Chapter 31 Discharge of Commercial Paper and Electronic Fund Transfers 7-45

ȱȱ